A company has set a target rate of return of 16% for its investment center.. project's return on investment is less than the target rate.. project's return on investment is greater than
Trang 13 Net cash flow could be used to measure performance in
a cost centers and investment centers
b revenue centers and profit centers
c revenue centers and investment centers
d profit and investment centers
4 Using a single performance evaluation criterion for an investment center
a is most effective because a manager can concentrate on a single goal
b can result in manipulation of the performance measure
c allows multinational investment centers' performances to be equitably compared
d is only appropriate if the criterion is non-monetary
5 A company has set a target rate of return of 16% for its investment center An
investment center manager in this company would
a acquire assets that would increase divisional income by more than 16%
19-1
Trang 2b sell all assets that do not generate divisional income of more than 16%.
c acquire assets that would increase sales by more than 16%
d acquire any technologically advanced assets that would cause costs to be
6 In evaluating the performance of a profit center manager, the manager
a and the sub-unit should be evaluated on the basis of the same costs and revenues
b should only be evaluated on the basis of variable costs and revenues of the
7 The Statement of Cash Flows may be superior to the cash budget as a performance
evaluation measure because
a cash flows are shown on the accrual basis on the cash budget
b the cash budget does not include capital investments
c cash flows are arranged by activity
d of all the above reasons
8 The Statement of Cash Flows indicates the cash inflows and outflows from
a investing, financing, and borrowing activities
b operating, investing, and sending activities
c merchandising, financing, and investing activities
d operating, investing, and financing activities
Trang 3c the return on investment on the new project exceeds the overall organization's
return on investment
d Division A's return on investment exceeds the return on investment of the overall
organization
10 If sales and expenses both rise by $100,000
a residual income will increase
b return on investment will increase
c return on investment will be unchanged
d asset turnover will decrease
ANSWER: c EASY
11. ABC Corp is composed of three operating divisions Overall, the ABC Corp has a
return on investment of 20% A Division has a return on investment of 25% If ABC Corp evaluates its managers on the basis of return on investment, how would the A Division manager and the ABC Corp president react to a new investment that has an estimated return on investment of 23%?
A Division manager ABC Corp president
Trang 413 The return on investment (ROI) ratio measures
a only asset turnover
b only earnings as a percent of sales
c both asset turnover and earnings as a percent of sales
d asset turnover and earnings as a percent of sales, correcting for the effects of
differing depreciation methods
14 Return on investment (ROI) is a term most often used to express income earned on assets invested in a business unit A company's return on investment would increase if sales
a increased by the same dollar amount as expenses and total assets increased
b remained the same and expenses were reduced by the same dollar amount that
total assets increased
c decreased by the same dollar amount that expenses increased
d and expenses increased by the same percentage that total assets increased
15 A sub-unit of an organization is evaluated on the basis of its ROI If this sub-unit’s sales and expenses both increase by $30,000, how will the following measures be affected?
ROI Assert turnover Profit margin
16 Which of the following would be an appropriate alternative to the use of ROI in
evaluating the performance of an investment center?
Residual Net cash Cost and revenue
income flow variance analysis
Trang 518 Presently, the Alligator Division of Animal Crackers Co has a profit margin of 30% If
total sales rise by $100,000, both the numerator and the denominator of the profit
margin will increase The net result will be
a an increase in the profit margin ratio to above 30%
b a decrease in the profit margin ratio to below 30%
c no change in the profit margin ratio
e a change in the profit margin ratio that cannot be determined from this
information
19 Profit margin indicates the portion of sales that
a covers fixed expenses
b is not used to cover expenses
c equals contribution margin
d equals product contribution margin
20 Profit margin equals
a income divided by sales
b incomes divided by average inventory
c income divided by average assets
d income divided by average stockholder’s equity
Trang 622 In the Du Pont model, profit margin is a ratio of
23 The Du Pont model measures ROI as it is affected by
a contribution margin and asset turnover
b profit margin and asset turnover
25 If a new project generates a positive residual income, the
a project's return on investment is less than the target rate
b project's return on investment is greater than the target rate
c project's return on investment is equal to the target rate
d relationship between the project's return on investment and the target rate cannot
necessarily be determined
26 A prospective project under consideration by P Division of C Co has an estimated
residual income of a negative $20,000 If the project requires an investment of
$400,000, the
a project generates a negative return on investment
b project's return on investment is zero
c project's return on investment is 5% less than the company's target rate
d company's target rate is 15%
Trang 727 Residual income is the
a contribution margin of an investment center, less the imputed interest on the
invested capital used by the center
b contribution margin of an investment center, plus the imputed interest on the
invested capital used by the center
c income of an investment center, less the imputed interest on the invested capital
used by the center
d income of an investment center, plus the imputed interest on the invested capital
used by the center
29 If a division generates a positive residual income then the division’s
a asset turnover was very high
b profitability was greater than that of other divisions in the company
c performance was above expectations
d actual return on investment exceeds the division’s target return
30 Residual income is determined as
a income times the asset turnover rate
b income times the inventory turnover rate
c income minus (asset base times target rate of return)
d sales minus (asset base times target rate of return)
Trang 8b yes yes yes
c no yes yes
d no yes no
32 An increase in a corporation's target rate would result in a(n)
a increase in residual income
b decrease in return on investment
c decrease in residual income
d decrease in both residual income and return on investment
34 If sales and expenses both rise by $100,000, profit margin will
a decrease and asset turnover will decrease
b increase and asset turnover will decrease
c decrease and asset turnover will increase
d increase and asset turnover will increase
35 Asset turnover equals
a income divided by average assets
b sales divided by assets
c sales divided by average assets
d assets divided by sales
Trang 936 The information below relates to costs, revenues, and assets anticipated for 1999 in B
ROI Asset turnover Profit margin
a increase increase increase
b increase no change increase
c increase increase no change
d no change no change increase
37 A division of Lucky Co reported a return on investment of 20% for a recent period If
the division's asset turnover was 5, its profit margin must have been
39 Z Division of XYZ Corp has the following information for 1998:
Assets available for use $1,800,000
Target rate of return 10%
Residual income $ 270,000
What was Z Division's return on investment for 1998?
Trang 10b 10%
Use the following information for questions 40-43:
Apple Division of the American Fruit Co had the following statistics for 1998:
Assets available for use $1,000,000 Book Value
$1,500,000 Market ValueResidual income 100,000
42 If the manager of Apple Division is evaluated based on return on investment, how much
would she be willing to pay for an investment that promises to increase net segment income by $50,000?
a $ 50,000
b $ 333,333
Trang 11c $1,000,000
d $ 500,000
43 If expenses increased by $20,000 in Apple Division,
a return on investment would decrease
b residual income would increase
c the target rate of return would decrease
d asset turnover would decrease
Use the following information for questions 44 through 46:
T Division of the Alphabet Co has the following statistics for its 1998 operations:
Assets available for use $2,000,000
T Division's return on investment 25%
T Division's residual income 200,000
Return on investment (entire Alphabet Co) 20%
44 Compute EVA assuming the cost of capital is 10% and the tax rate is 40%
46 If Alphabet Co evaluates its managers on the basis of return on investment, the manager
of T Division would invest in a project costing $100,000 only if it increased net segmentincome by at least
a $10,000
b $15,000
c $20,000
Trang 12d $25,000.
47 A Corp has a target return of 15% If a prospective investment has an estimated return
on investment of 20%, and a residual income of $10,000, what is the estimated cost of the investment?
48 The Bullwhip Division of Leather Products Co is considering an investment in a new
project The project has an estimated cost of $1,000,000 If Leather Products Co has a target rate of return of 12%, how large does the return on investment on this project need to be to generate $150,000 of residual income?
49 In the X Division of S Co., 1998 segment income exceeded 1998 residual income by
$15,000 Also for 1998, return on investment exceeded the target rate of return by 10%.What was the level of investment in the X Division for 1998?
50 BAD Co has established a target rate of return of 16% for all divisions In 1998,
Division D generated sales of $10,000,000 and expenses of $7,500,000 Total assets at the beginning of the year were $5,000,000 and total assets at the end of the year were
$7,000,000 For 1998, what was Division D’s return on investment ?
a 20.83 %
Trang 13b 35.71 %
c 41.67 %
d 50.00 %
51 BAD Co has established a target rate of return of 16% for all divisions In 1998,
Division D generated sales of $10,000,000 and expenses of $7,500,000 Total assets at the beginning of the year were $5,000,000 and total assets at the end of the year were
$7,000,000 For 1998, what was Division D’s residual income?
a 1.538
c 0.650
Trang 14ANSWER: a MEDIUM
54 Pasta Division of We Make Italian, is evaluated based on residual income generated For 1998, the Division generated a residual income of $2,000,000 and net income of
$5,000,000 The target rate of return for all divisions of We Make Italian is 20% For
1998, what was the return on investment for Pasta Division?
55 Qualitative non-financial performance measures
a are usually the most well-received by managers
b often reflect long-term organizational goals better than financial performance
measures
c can only be developed in the production area of an organization
d is limited by the number of critical success factors defined by the organization
56 Relative to qualitative performance measures, quantitative performance measures are less
a subject to manipulation
b dependent on accounting information
c effective in the pursuit of organizational goals
Trang 1558 Non-financial performance measures (NFPMs) are better than financial measures in that
NFPMs
a provide a better indication of customer satisfaction
b may better predict the direction of future cash flows
c directly measure how well an organization does those things that create
b both short-term and long-term measures related to critical success factors
c long-term supplier satisfaction levels
d short-term financial viability
60 Which of the following would be considered a non-financial performance measurement?
a increase in market share
b variances from standards
c number of customer complaints
d cost of engineering changes
61 Which type of financial measure better predicts the direction of future cash flows?
Non-financial Measures Financial Measures
62 Which of the following would be classified as a non-financial critical success factor?
Technical Manufacturing Manufacturing
Trang 16Quality Excellence Efficiency Effectiveness
a no no no yes
b yes no no no
c yes yes yes yes
d yes yes no yes
63 Which of the following is not one of the four areas of performance measurements
mentioned in the text?
64 Which of the following is necessary for any valid performance measurement?
a It must be part of the financial accounting system in use
b It must be quantifiable
c Goal congruence must be promoted by its use
d It must be financial in nature
Trang 17ANSWER: a EASY
67 Which of the following is the throughput measure?
a Processing time/Total time
b Good units/Total time
c Good units/Processing time
d Total units/Total time
69 Process quality yield reflects the proportion of
a good units to bad units
b time required to produce a good unit
c total units manufactured that are good
d total time spent to time available
71 Process quality yield reflects the proportion of
a time it takes to make a good unit
b good units to defective units
c total time spent to total time available
d total units produced that are good units
Trang 1872 Holding total production in units constant, as the proportion of defective units to total
units declines, all of the following measures will be affected, except
a total unit sales
b throughput
c process quality yield
d process productivity
73 Process productivity is calculated as
a total units divided by non-value-added processing time
b total units divided by value-added processing time
c value-added processing time divided by total units
d value-added processing divided by total time
75 When assessing performance, one way to compensate for differences among divisions of
a multinational organization would be for the parent company to
a use different target rates of return to compute residual incomes
b modify the return on investment calculation so that foreign currency fluctuations
are removed from all financial statement figures
c classify all domestic divisions as investment centers and all foreign divisions as
profit centers
d use financial performance measures for units whose records are kept in the
domestic currency and non-financial measures for units whose records are kept
in a foreign currency
Trang 1976 If performance measures are perfect proxies for organizational goals,
a sub-optimization will be enhanced
b sub-unit managers will strive to achieve organizational goals
c sub-units can all be decentralized
d residual income will rise
77 The following information is made available for June, what is the throughput per hour?
Value-added hours of manufacturing time 20,000
Total hours of manufacturing time 30,000
78 The following information is made available for June, what is the process quality yield?
Value-added hours of manufacturing time 20,000
Total hours of manufacturing time 30,000
79 One of the products manufactured by I Can Fly TOO, Company is a plastic disk The
information below relates to the Disk Production Department:
Trang 20Good units produced 200,000
Units started in production 250,000
Processing time (budgeted hours) 425
Processing time (total hours) 400
Value-added processing time 300
What is the process quality yield in the Disk Production Department?
80 One of the products manufactured by I Can Fly TOO, Company is a plastic disk The
information below relates to the Disk Production Department:
Units started in production 250,000
Processing time (budgeted hours) 425
Processing time (total hours) 400
Value-added processing time 300
What is the throughput per hour in the Disk Production Department?
81 One of the products manufactured by I Can Fly TOO, Company is a plastic disk The
information below relates to the Disk Production Department: